2015-12TS
Published April 2015
Quantifying the Benefits of Trunk
Highway and Local Road Investments
What Was the Need?
TECHNICAL
SUMMARY
Technical Liaison:
Ted Schoenecker, MnDOT
Ted.Schoenecker@state.mn.us
Project Coordinator:
Nelson Cruz, MnDOT
Nelson.Cruz@state.mn.us
Principal Investigator:
Zhirong (Jerry) Zhao,
University of Minnesota
LRRB PROJECT COST:
$93,468
Transportation engineers and planners see firsthand the
many positive impacts of transportation investments on
economic development. They are frequently challenged,
however, to demonstrate that relationship to the public
and to elected officials entrusted with making decisions
on the use of limited funds available to invest in all of their
communities’ needs.
On average, trunk highway
investments produce about
$3 in economic benefits in a
region for every $1 invested.
Local road investments have
a positive impact primarily
for the county where they
are built.
Local agencies needed a way to demonstrate the value
of transportation investment by showing its impact on
economic development. While there have been earlier
attempts in Minnesota and elsewhere to quantify this relationship, this research is the first effort to take a county-bycounty approach and evaluate the impact of local transportation investments on both a
county and its neighbors.
What Was Our Goal?
The goal of this project was to quantify the relationship between transportation investment and economic development, represented by the effect of investment on a county’s
property tax base.
What Did We Do?
To gather information for this report, researchers examined county-level data from several sources. Two sources provided information about local transportation investments:
The Minnesota County Finances Report has collected data about grants and expenditures for local roads managed by counties since 1985, and MnDOT’s Trunk Highway
Construction and Maintenance Costs provides data about annual trunk highway construction and maintenance costs from 1995 to 2012.
An increase in property tax
values is a key economic benefit
of transportation investments,
both locally and regionally.
To quantify benefits, researchers analyzed data about property tax capacity, levies and
revenues from the Minnesota Office of the State Auditor, while the Minnesota Department of Revenue provided data about the total estimated market values of each county.
However, estimated market value was not ultimately used for the analysis because the
data covered a relatively short time (2006 to 2011) that coincided with the subprime
mortgage crisis, which would have skewed results.
Researchers created a statistical model to calculate the impact of transportation investments on a county’s property tax revenues. The model controls for unrelated factors
that would affect tax revenues, including population, age structure, population density,
personal income, educational attainment and level of urbanization.
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They applied the model to calculate the impact of both local road and trunk highway
investments on a county’s property tax revenues. Researchers also evaluated how investments in both types of roads in a county affected tax revenues in neighboring counties.
What Did We Learn?
According to the research findings, investments in both local roads and trunk highways
have positive returns. However, the impacts of these investments affect regions very
differently.
continued
“We all know we don’t
have enough funding for
transportation, in part
because we don’t have
good evidence to show the
benefits of transportation
and give political leaders
the incentive to invest.”
—Jerry Zhao,
Associate Professor,
University of Minnesota
Humphrey School of
Public Affairs
Trunk highway investments, such as Trunk Highway 61 in northeast Minnesota, produce significant economic benefits in the counties where they are built and in neighboring counties.
“There’s been an
understanding for years
that investment in roads
and bridges pays by
facilitating economic
development, serving
citizens and promoting
safety. This study provides
objective data that shows
that investment does in
fact pay.”
—Alan Forsberg,
Blue Earth County
Engineer
On average, $1 of local road investment increases property value by $1.254 for the
county. However, local road investments can have a negative impact on the property
tax revenue in neighboring counties. The overall regional impact is still positive but
reduced, likely because of inter-local competition: Local roads tend to support a community’s economic development at the expense of its neighbors.
Trunk highway investments have a somewhat lower return on investment for the county
where they are made. A $1 trunk highway investment increased a county’s property
value by $0.871. However, investments produced significant benefits to neighboring
counties as well, producing total benefits throughout the region of nearly four times that
amount, likely because of the role that trunk highways play in connecting communities.
These results are averages statewide, so the benefits of investment in an individual road
may vary significantly. The average ROI of road investments in the Twin Cities tends to
be lower than in rural areas, particularly in the western part of the state, simply because
the urban area already has higher levels of roadway investment.
What’s Next?
This research should provide a valuable tool for local agencies and MnDOT to use in
communicating the economic value of transportation investments and winning support
for these investments from elected officials and the general public.
While the research suggests that trunk highways generally have greater regional benefits than local roads, individual projects will still need to be assessed for their specific
impacts. For example, some local roads function more like trunk highways in the way
they connect communities. This research shows that roads with the greatest regional
significance provide the greatest benefits.
Produced by CTC & Associates for:
Minnesota Department
of Transportation
Research Services & Library
MS 330, First Floor
395 John Ireland Blvd.
St. Paul, MN 55155-1899
651-366-3780
www.mndot.gov/research
No follow-up research is currently planned, although it may be valuable to analyze the
data at more detailed levels to understand subtleties such as the impact of geographic region, how ROI changes over time and the difference in economic effects of investment
and maintenance spending. Future research may also evaluate the impact of transportation investment on other economic factors such as income tax or sales tax bases.
This Technical Summary pertains to the LRRB-produced Report 2015-12, “Transportation Investment
and Economic Development in Minnesota Counties,” published April 2015. The full report can be
accessed at http://www.lrrb.org/PDF/201512.pdf.